Germany rejected calls for increased European Union 750 million euros ($ 1 billion) of aid funds or enter joint bond sales, saying its refusal to bear the additional costs to end the debt crisis.
With European finance ministers meeting in Brussels today for their monthly meeting, German Chancellor Angela Merkel has rejected pleas from Belgium and central banks to boost emergency fund to save countries like Portugal and Spain to fall prey speculation.
"At this moment I see no need to expand the fund," Merkel told reporters in Berlin today. She said the EU treaties joint bar sales of bonds, which could require borrowing costs in Germany, the lowest in the euro area.
European political discord pushed down the bonds in Spain and Italy today, reversing gains last week after the purchases made by the European Central Bank briefly eased concerns about the crisis from spreading. The ECB bought the most bonds in a week since June, according to a statement.
The yield on the benchmark 10-year-Spain rose 12 basis points to 5.11 percent as of 3:30 pm in London. Italy yields increased 10 basis points to 4.49 percent. The euro stood for a three-session rally, dipping 0.9 percent to $ 1.3295.
"There is no credibility"
Europe has "no credibility" to eliminate the debt restructuring, Kenneth Rogoff, a professor at Harvard University and former chief economist of the International Monetary Fund chief, said in a Television interview broadcast today. "Greece will be very lucky to avoid restructuring, Ireland, Portugal - only they are in denial, saying it can not happen. I really have not drawn clear lines, they have not really said what I wanted to make choices, they do not actually have done. "
Under pressure to protect taxpayers in the biggest economy in Europe, Merkel is drifting back into his role in the early stages of the crisis, when Germany stood firm against an aid package to Greece.
The political confrontation can mount the ECB, with more of the burden of crisis management, said economists at Citigroup Inc., including Juergen Michels and Michael Saunders in London in a December 03 letter sent by e-mail.
"Finally, the ECB will be forced to increase its contribution to the substantial rescue plan," wrote the economists. "We hope that after another round of tensions in the market, the European fiscal policy will eventually come up with additional measures to combat the crisis."
BCE bond purchases
The central bank based in Frankfurt, said today it will set € 1965000000 purchases of bonds last week. While the figure was the highest in 22 weeks, did not include bonds purchased between December 1 and December 3.
The bank is "active" operating in the government bond market, Governing Council member Athanasios Orphanides said today in Nicosia. The ECB will act as needed, said Orphanides, who heads the central bank of Cyprus.
Greece won a bailout of the EU and the IMF 110 million euros in May, the EU leadership to create the three-year facility was used for the first time in Ireland, with a program of 85 billion euros last month.
ECB President Jean-Claude Trichet, said last week that the EU might need to complete the emergency fund, a position echoed by December 4 Belgian Finance Minister Didier Reynders.
Reynders said the IMF also wants the EU to put more money and increase its quota of 250 million euros. IMF spokesman William Murray declined comment. Managing Director, Dominique Strauss-Kahn will attend the meeting tonight in Brussels.
Quad Call
Governor of Bank of Belgium, Guy Quaden, today called up, told reporters in Brussels: "It depends on the politicians to decide that, but personally I am more in favor."
Belgium, with the third highest debt in the euro area came under a speculative attack last week. Its borrowing costs to 10 years rose as high as 139 basis points above Germany on 30 November, the widest spread in at least 17 years.
Germany also tried to suppress public debate on possible joint bond sales, after Italy announced its support for "E-Bond" proposed by the Luxembourg Prime Minister Jean-Claude Juncker, the chairman of the meeting tonight euros.
Merkel said the European consultations "should be the goal-oriented and conducted internally, because anything else causes renewed anxiety."
In a commentary in the Financial Times, Juncker and Italian Finance Minister Giulio Tremonti called for the creation of titles sold together to cover half the debt of the euro zone governments.
Two-tier bonds
To deal with the German opposition to subsidize weak fiscal, the bonds of countries with high budget deficits could be converted into European bonds at a discount, Juncker and said Tremonti.
Eurobonds are "intellectually attractive," said EU Economic and Monetary Affairs Commissioner Olli Rehn in Brussels. He noted that the "state of the debate" is not in favor of the idea.
Spanish Economy Minister, Elena Salgado, said today proposed Eurobond issuance set is a "possibility to be explored."
Finance ministers of the 16 euro countries will meet at 5 pm today in Brussels to discuss the next steps, including the shape of a permanent framework for crisis resolution to replace the temporary fund when running in 2013.
The meetings in Brussels two days end tomorrow, when ministers from the 27 EU countries give formal approval to Ireland's aid package designed to stabilize the banking system and push down the deficit.
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